Southeast Asia weathers the storm

Malaysia's economy grows 4% in Q1, withstands SARS

By

MarikoAndo

TOKYO (CBS.MW) -- Southeast Asian economies have weathered the storm better than their SARS-wracked east Asian neighbors as both Malaysia and the Philippines reported solid growth of over 4 percent in the first quarter.

But some economists warn that regional growth may slow in the second quarter given that the deadly virus is still lurking around.

Malaysia's economy expanded 4 percent in the Jan.-March quarter from the year-ago period as strong public sector spending withstood the impact from SARS, the central bank said late Wednesday. Still, the growth rate was lower than economists' forecast of 4.3 percent, according to a Reuters poll.

The central bank said that the country's manufacturing sector, which accounts for a third of GDP, expanded by 5.2 percent in the first quarter from a year earlier. The services and agriculture sectors grew 4 percent and 3.6 percent, respectively.

"The Malaysian economy has remained resilient despite an external environment marked by heightened uncertainty and impact of SARS on regional economies in the final part of the quarter," Bank Negara Malaysia said in a statement.

The central bank reiterated its growth forecast of 4.5 percent for 2003.

"Going forward, the outlook for the second half of the year is for further strengthening of the Malaysian economy. On the external front, the outlook for the major industrial economies in general and the U.S. in particular has improved, although growth is likely to be more modest than earlier expectations. Proactive measures by the authorities in the area of monetary and fiscal policies have been taken to support growth."

Last week, Malaysian government announced an economic stimulus package worth about 7.3 billion ringgit ($1.9 billion) in order to alleviate the impact of SARS and strengthen economic activity. Such spending is expected to help growth pick up in the second half of the year, said the central bank.

Some economists say that Malaysia may be too optimistic about its growth prospects.

Yip Yee Lan, an analyst from BNP Paribas Peregrine Securities, said that he expects Malaysia's economy to increase only 4 percent in 2003. "There may be a risk of a further downward revision given that the SARS outbreak is not over and growth is expected to ease further in 2Q03 due to the impact of SARS," he said in a note.

Morgan Stanley is even less bullish, saying it expects Malaysia's GDP to grow 3 percent in 2003.

Severe acute respiratory syndrome has killed more than 745 people, mainly in China, Hong Kong and Taiwan, and infected more than 8,200 around the world. While there have only been a small number of reported SARS cases in Southeast Asia, the disease has dampened the key travel and tourism sectors nonetheless.

Meanwhile, the Philippine economy expanded 4.5 percent in the first quarter from the year-ago period, government data showed. The growth was in line with market estimates.

On a quarterly basis, however, the economy contracted 0.5 percent in the first quarter from the last three months of 2002.

The government is targeting 4.2 to 5.2 percent economic growth this year after 4.6 percent year-on-year expansion in 2002.

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